Canadian Finance Minister Paul Martin hails credit union alt

<x-flowed>Business section, Calgary Herald, Front Page
Friday 7 May 1999
Eric Beauchesne, Calgary Herald

Finance Minister Paul Martin seems ready to give the $50billion
credit union movement freedom to compete headon with the big banks in
providing full financial services at the grassroots community level.

"The government is convinced that the key to that enhanced competition is
to foster a secondtier of financial institutions," he told credit union
members at a conference here Thursday.

"We are looking for ways to ensure that viable, locally oriented
institutions can coexist with the global power houses," Martin said. "To
that end, we are looking and let's be very clear, unequivocally for a
stronger, a more competitive Canadian credit union movement to challenge
all comers across the country."

Martin later refused to give a "scoop" to reporters on the contents of his
banking paper, which is coming out next month and will outline legislative
and regulatory reforms to the financial services industry.

But to realize the vision he has for credit unions would require changes to
the Cooperative Credit Association Act, which regulates the way they are
able to do business .

Those changes would include giving credit unions the right to establish
cooperative banks, operate joint automated teller machines, and pool capital.

The more than 800 credit unions now operate in a complex regulatory
environment, governed by a provincially administered federal act. Making
the needed changes to the rules governing the credit unions to give them
more flexibility and clout was also recommended by the federal banking task
force in its report last year.

The proposal has had strong support from Alberta's 84 credit unions which
want to be able to market themselves as nationwide financial services
providers.

First Calgary Savings president and chief executive officer Dave Gregory
has been among those pushing to give credit unions more clout. Gregory has
said the changes would allow credit unions the freedom to expand their
services, allowing them to compete with banks on all levels, but retain
their customer service component.

Bill Knight, president of Credit Union Central of Canada, was "encouraged"
by Martin's comments which suggest the reforms the movement is seeking will
be in the banking paper.

Knight said the goal of the credit union movement is to double its size
within five years to $100 billion, putting it in a league with the big
banks, by providing full financial services to consumers and small and
medium sized businesses across the country.

"You will see more of a Canadian presence," he said, suggesting that will
include a national brand for credit union services.

And the credit union movement could also enter into joint ventures with the
caisses populaires, their Quebec equivalent.

"We need three or four substantive changes (to the federal act governing
credit unions and possibly the bank act) that will give us greater
flexibility for joint ventures, commercial lending capacity throughout the
country," Knight said. "With those changes from the federal government we
will be more competitive."

But Knight said there is no interest in becoming like the big banks.

"Let's be very clear, our greatest strength is our relationship banking in
the neighbourhoods and in the communities," Knight said. "So this is all
about enhancing the strength on the front lines of retailing financial
services to Canadians, not getting away from it."

In exchange, for giving credit unions more flexibility, Martin made it
clear that he expects them to provide service to all consumers, including
those who need basic banking, such as the poor, the disabled and those who
live in rural Canada.

"While we're doing very well in the use of the new technologies, I ask you
if you think we in fact are doing as well in providing services to
lowincome Canadians, to disabled Canadians," he said.

He added that it's also essential to "ensure adequate access to financial
services in smaller, remote and rural communities."


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